Associative Forecasting - b = = =.25 ∑ xy nxy ∑ x 2 nx...

1
Associative
Forecasting
Used when changes in one or more
independent variables can be used to predict
the changes in the dependent variable
Most common technique is linear
regression analysis
We apply this technique just as we did
in the time series example

2
Associative
Forecasting
Forecasting an outcome based on predictor
variables using the least squares technique
y = a + bx
^
where y = computed value of the variable
to be predicted (dependent variable)
a = y-axis intercept
b = slope of the regression line
x = the independent variable
though to predict the value of the dependent
variable
^

3
Associative
Forecasting Example
Sales Local Payroll
($000,000), y ($000,000,000), x
2.0 1
3.0 3
2.5 4
2.0 2
2.0 1
3.5 7
4.0 –
3.0 –
2.0 –
1.0 –
| | | | | | |
0 1 2 3 4 5 6 7
Sales
Area payroll

4
Associative Forecasting
Example
Sales, y Payroll, x x 2 xy
2.0 1 1 2.0
3.0 3 9 9.0
2.5 4 16 10.0
2.0 2 4 4.0
2.0 1 1 2.0
3.5 7 49 24.5
∑ y = 15.0 ∑ x = 18 ∑ x 2 = 80 ∑ xy = 51.5
x = ∑ x /6 = 18/6 = 3
y = ∑ y /6 = 15/6 = 2.5